With harvest done and fall work wrapped up, many farmers and landowners are considering their land rental arrangements for next year.
Landlords are concerned with receiving a fair return on their land and ensuring that the tenant is a good steward. Tenants are worried that they could lose the rental property if the neighbours offer a higher rent than they can afford to match.
“In the midst of these concerns, both parties will want to sit down and decide what to do for next year,” says Dale Robinson, business management specialist at Alberta Agriculture at Stettler.
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These discussions will go better if the parties follow three keys:
- Communicate: Tenants need to make sure that the landlord understands their farming practices. High fuel and equipment prices are a recent development so the landlord may not realize the cost savings obtained by using a no-till drill and chemical weed control.
It is also important to ask about the landlord’s expectations. Many landlords are concerned about maintaining soil fertility and organic matter, so issues such as regular soil testing and the removal of straw must be addressed.
- Make it win-win: Too often, decisions are based on how much the tenant is willing to pay. In many areas, the upper end of the cash rental rate far exceeds the contribution margin of the best crops.
Landlords need to decide if it’s worth losing a good tenant to try chasing an extra $2 per acre.
Other factors could be considered, such as including a forage crop in the rotation or having the tenant plow out the landlord’s driveway in the winter.
- Use a written lease agreement: This is the best insurance for a trouble-free deal. By putting the time and effort into drawing up a lease agreement that suits the requirements of both parties, most of the potential problems can be resolved.
Any other problems that may arise will be easy to deal with using the dispute resolution clause.
- An excellent resource for landlords and tenants is the booklet Leasing Cropland in Alberta, Robinson said.
“The booklet outlines the pros and cons of cash rent and crop share arrangements, as well as discussing legal surface leases and tax issues. It also contains a detailed sample lease agreement that can be used as a starting point to draft individual agreements.”
